Russia ‘better prepared’ than other oil-producing countries
Russian Finance Minister Anton Siluanov said on Wednesday that Russia has enough state reserves to ensure stability in its financial markets and is better prepared than many other countries with oil revenue amid low oil prices. Siluanov said Russia would be able to fully accomplish tasks set by President Vladimir Putin, which include raising living standards, without making any adjustments to the budget.
Britain’s oil and gas authority suspends licensing in 2020/21
Britain’s Oil and Gas Authority has halted its licensing rounds for offshore exploration acreage in the North Sea at least until next year, it said on Tuesday. “The OGA have temporarily paused Licence Round activity. There will be no Round in 2020/21, which will allow relinquishments to take place so more coherent areas can be reoffered in future and give industry time to deliver on work commitments in the existing portfolio of licences,” it said. “The OGA is planning for a 33rd Round and will confirm the timing as soon as it is finalised.”
Analysis: India’s move to 10 ppm sulfur limit in April could boost Asia’s gasoline market – briefly
India’s adoption of low-sulfur motor fuel standards from April 1 could provide a welcome upside for the Asian gasoline market as buyers increasingly eye cheap and ample import cargoes to build inventories, but the opportunity will not last forever as the country increasingly moves toward self-sufficiency. India is set to mandate Euro 6 equivalent Bharat Stage VI fuel grades in its domestic market from April 1. The transition will see the sulfur level in domestically consumed motor fuels fall to a maximum of 10 ppm from the current 50 ppm. While Indian refiners have been preparing for the transition for some time, recent price movements in Asia have made import barrels increasingly attractive, industry sources said. “Buying gasoline is very cheap now. Costs have been pummeled by what has happened over the last two months,” one source with an Indian company said. The outright price of benchmark FOB Singapore 92 RON gasoline has fallen almost 40% to date in 2020, S&P Global Platts data showed — the direct result of the spread of the coronavirus in the region and the weekend plunge in crude oil markets as the fight for market share ramps up between Saudi Arabia and Russia. Against this backdrop, gasoline supply in India is set to tighten due to a heavy turnaround schedule stretching into the middle of the second quarter. The average refinery outage in India is estimated at 205,000 b/d in March and 169,000 b/d in April — four to five times higher than in the same period last year, according to S&P Global Platts Analytics data. However, India’s gasoline demand remains robust, rising 3.5% year on year to 2.456 million mt in January, latest data from India’s Petroleum Planning and Analysis Cell showed. The PPAC forecasts India’s gasoline demand rising 8.43% on year to 33.43 million mt in the fiscal year ending March 31, 2021. HOME FOR CHINESE BARRELS As a result, opportunities abound for Chinese barrels to find homes in India, particularly as Chinese gasoline exports are typically low sulfur grade, market sources said. “It is not hard to obtain low-sulfur gasoline from the Chinese [refiners]; most of them can do it,” one trader said. China’s domestic sulfur content rules have tightened steadily since the adoption of China V standards in 2017 and China VI standards in 2019, which both set the maximum sulfur level at 10 ppm. The viability of Chinese exports to India was demonstrated in 2019, when state-owned PetroChina supplied HPCL with its first MR-sized cargo following the conclusion of a term deal between the parties. The deal could be repeated, as HPCL is seeking 2.736 million mt of gasoline for delivery over April 2020-March 2021 on a term basis in open tenders seen by Platts. “The base gasoline for blending could most likely also come from China,” another trader said, adding that “the fact that HPCL sought so much term [cargo] could signal that their systems are some time away from being fully ready to independently produce low-sulfur mogas.” Chinese export cargoes are expected to remain abundant through the year. “We expect [Chinese] national oil companies will accelerate gasoline exports, starting from April, after heavily run cuts and turnaround season in Q1 2020. We hold our opinion that NOCs will continue export volume to handle China’s domestic gasoline oversupplied market and total year-end exports will leap by 24.6% year on year to 476 MB/D for 2020,” Platts Analytics said in a recent report. INDIA’S INCREASING SELF-SUFFICIENCY Nevertheless, India as an outlet for Asian gasoline is not expected to be a mainstay in the long term, industry sources said. Indian refiners are expected to gradually move towards self-sufficiency, with the country seen “balanced and net long” in the longer term, one market source said. “The market cannot rely on India to be a demand center for gasoline — once the refineries come back from upgrading works, the situation will change,” a Singapore-based market observer said. State-owned Indian Oil Corporation, the country’s largest refiner, says it is ready to supply Bharat Stage VI motor fuels following the completion of a revamp program at its Mathura refinery in February, while HPCL and Bharat Petroleum Corporation Ltd have also geared up to supply domestic pump stations with the new grade. India’s electric vehicle policy might also hamper gasoline demand growth in the long term. The country’s capital New Delhi in late 2019 approved a policy that provided higher subsidies for vehicles and charging stations, lower interest rates for EV purchases, deadlines for the compulsory shift to EVs for government departments and the waiving of road taxes for EVs, Platts reported earlier. Should it meet its objectives, 25% of all new vehicle registrations by 2024 will be battery electric vehicles, according to a summary document from Delhi’s Transport Ministry.
Power ministry wants levies on LNG value chain to be removed
Price of liquefied natural gas (LNG) has been sliding in the world markets since January 2019 – about 40% – but that doesn’t seem to raise the capacity utilisation level of India’s gas-based power plants, most of which are stressed. According to sources, even such a big fall in LNG prices hasn’t made the domestic, gas-based power units viable and attractive for discoms to buy electricity from. “Cost of gas, which includes landed cost of LNG imports, regasification and transportation costs, is still high and uncompetitive in relation to coal-based plants,” a source said. Domestic gas production has plummeted over the years. Reliance Industries’ KG DG gas output, which peaked at 69.43 million standard cubic meter per day (mmscmd) in March 2010 is now stagnating at abysmally low levels, with the asset at “late life stage”. As much as 24,900 mega-watt of gas-based power stations continue to operate at very low utilisation levels (see chart); in fact their plant load factor has declined in recent months. Though touted as one of the cleanest source of reliable power, the share of electricity from gas-based power plants remain less than 4%. Union power minister RK Singh told FE that the government is considering a scheme for gas-based power plants, but said it would necessitate all stakeholders to make some sacrifices. “For example, the states such as Gujarat and Andhra Pradesh where LNG lands and where they are regasified, they have to reduce their sales tax so that gas-based power can be purchased by discoms at tariffs that are viable ,” Singh said. He added that “owners of the gas pipelines, Gail and other firms, will have to cut some slack”. “Things would improve if we have more regasification terminals,” he added. Sales tax on LNG regasification is upto 22%. Domestic gas price, which is linked to the weighted average price of four global benchmarks, is currently at $3.23/mmBtu. Spot LNG prices have fallen from $3.11/mmBtu to $1.93 mmBtu. Gas-based power is much costlier (ranging between Rs 7/unit to even Rs12/unit) compared with Rs 2.41-3.50/unit range discoms pay for other power sources, on a weighted average basis. Even with gas prices coming down, it is difficult for gas power stations to match the prevalent power tariffs. The problems for gas-based units have been accentuated with the continuous drop in the price of solar and wind-based electricity, coupled with demand growth not being at par with the surge in addition of power generation capacity. Gas consumption in the country is majorly dependent on imports, and cooking and transportation segments gets priority in terms of allocation of the fuel. About 167 mmscmd of natural gas was consumed in FY19, with 47% being imported. About 26% of gas consumed in the country was used by the power sector, but the share of power usage has been falling constantly, with only 17% supplied for electricity production in January, 2020. “ONGC supplies gas to power plants at prices as high as $7.68/million British thermal units (mmBtu), from fuel sourced from off-shore deepwater basins, which makes it impossible to sell electricity at lower prices to discoms,” a senior official from a gas-based power company told FE. “For gas based power to be affordable, it has to be priced at around Rs 3/unit, and to achieve such pricing the cost gas at burner tip should not be more than $5.5-6/mmBtu,” the power ministry had earlier informed the parliamentary committee. Owing to their ability to start and stop power generation faster than other conventional modes, gas power plants are more suitable for balancing the requirement of the grid, especially with the increasing penetration of intermittent solar and wind power. The parliamentary committee on energy had recommended to use gas-power plants as “peaking units”, to be used during periods of rise in demand. The committee had earlier expressed its dismay on the petroleum ministry and lenders for not having any solution regarding stranded gas power plants. Rajnish Kumar, chairman, SBI, had admitted to the committee that lenders are “groping in the dark” on this issue and with no solution in sight, “we have to write off this investment”.
Assam government to exercise partial right of first refusal over BPCL stake-sale in Numaligarh Refinery
The Assam government has indicated willingness to raise its stake in Numaligarh Refinery Limited (NRL) to 26 per cent from 12.35 per cent, setting the stage for Bharat Petroleum Corporation Ltd (BPCL) to sell the balance shares it holds in the subsidiary, along with transfer of management control to a Central Government company in the oil sector. The 26 per cent stake will help the State government secure some privileges available to entities holding 26 per cent under the Companies Act. The State government had the right of first refusal if BPCL is to sell its 61.65 per cent stake in NRL, a mini ratna PSU with capacity to process three million metric tonnes per annum (MMTPA) of crude, according to a memorandum of understanding signed by the two sides. “The Assam government has responded to a BPCL request seeking its stand on exercising the right of first refusal over BPCL’s stake in NRL,” a government official briefed on the development said. The government has decided to privatise BPCL after hiving off NRL, which will be sold to a Central Government company in the oil sector if Assam government decline to exercise its right of first refusal to buy the shares owned by BPCL in NRL. On Saturday, the Central Government issued a global expression of interest (E0I) seeking bids for its 52.98 per cent stake in BPCL. With the Assam government officially communicating to BPCL its desire to raise stake in NRL to 26 per cent, BPCL will have to sell 13.65 per cent of its 61.65 per cent stake in NRL to the state government. The balance 48 per cent held by BPCL (post sale of 13.65 per cent to Assam government) will be sold to a government company, most likely Oil India Ltd, the government official mentioned earlier said. Oil India currently holds 26 per cent stake in NRL. This which will jump to 74 per cent after buying the 48 per cent take from BPCL, making it the majority shareholder of NRL. The share-sale in NRL will be handled by the same transaction advisors and asset valuers appointed by the Department of Investment and Public Asset Management (DIPAM) for the stake-sale in BPCL. DIPAM has hired Deloitte Touche Tohmatsu India LLP to manage the deal. BPCL will sell 13.65 per cent stake to the Assam government at the same price discovered in the bidding process for the sale of 48 per cent stake to a government oil company. “This will avoid the task of having to discover price only for the government of Assam,” the government official said.